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Tether’s Gold-Backed Synthetic Dollar is Part of a Broader Plan that Includes AI

Last Updated June 18, 2024 10:20 AM
Eddie Mitchell
Last Updated June 18, 2024 10:20 AM
Key Takeaways
  • Tether has revealed a novel digital dollar token backed by Tether Gold (XAUt).
  • The stablecoin behemoth has also created a platform for the creation of “tethered” assets.
  • Tether’s ongoing expansion and continued investments suggest a transformative year ahead.

Leading stablecoin issuer Tether (USDT) has unveiled its latest offering, “Alloy” (aUSDT), a new stablecoin backed and over-collateralized by Tether Gold (XAUt).

The move comes a week after Tether announced a $1 billion investment plan as it expands into AI, emerging financial market infrastructure, and other cutting-edge fields.

Tether Alloy

As per the official announcement, Tether is introducing a “novel” new type of digital asset known as “tethered assets”, with the first being Alloy.

As per the official announcement , aUSDT will be over-collateralized by Tether Gold (XAUt). In short, it’s a synthetic dollar with the U.S. dollar’s value and function but isn’t directly backed by it. Explaining how tethered assets work, Tether writes that they are:

“[…]designed to track the price of reference assets through stabilization strategies like over-collateralization with liquid assets and secondary market liquidity pools. “

According to Tether, what makes aUSDT unique is the over-collateralization it will receive from XAUt, giving it backing from “real physical gold ” stored in Switzerland. Notably, Alloy is also an “open platform” on which other tethered assets, including yield-bearing products, can be created.

The synthetic dollar can be minted by depositing XAUt as collateral into Ethereum-based smart contracts and price oracles. Therefore, users are able to transact aUSDT and retain their gold-backed assets. Tether CEO, Paolo Ardoino, says:

“While the stabilization mechanism is different compared to traditional options like USDT, this innovative solution marks an exciting milestone, and we eagerly anticipate how it will interact with the rest of the market. Moreover, we plan to make this innovative technology available in our upcoming digital asset tokenization platform as well.”

Evidently, Tether has a big year ahead, and this latest announcement comes just a week after it announced intentions to pour $1 billion into cutting-edge technologies such as AI, biotech, and financial infrastructure.

AI, Biotech, and Emerging Markets

Focusing on cutting-edge technologies, essential scientific developments, and vital financial infrastructure, Tether seems poised to become something more than just a stablecoin issuer.

Tether is on an investment streak. As it diversifies its portfolio across enterprises within crypto and beyond, CEO Paolo Ardoino announced an ambitious 12-month investment plan .

Ardoino told Bloomberg  that Tether Investments, the company’s venture capital arm, will pour some $1 billion into three key areas: alternative financial infrastructure for emerging markets, biotechnology, and artificial intelligence (AI).

The move underscores Tether’s growing influence and ambition. In true crypto spirit, Ardoino emphasized  Tether’s commitment to investing in technologies that reduce the reliance on legacy finance and big tech companies.

Demonstrating this commitment, Tether announced a $18.75 million  investment into Taiwan-based XREX on June 5, 2024. XREX is a “blockchain-enabled financial institution” working to improve financial inclusion and facilitate cross-border payments in emerging markets.

Ardoino pointed out that over the last two years, Tether has poured some $2 billion into these sectors. With a small team of around 15 people, Tether Investments receives hundreds of deals per month primarily from startups, “[…]and we only end up doing a very small percentage of that,” he added .

Tether 2024

In April, Tether announced  it would be making some significant changes to the organization to expand its influence and capabilities beyond stablecoins. This involved the firm restructuring into four divisions: Data, Finance, Power, Education, and “Evo”.

Tether had already been active in these areas. However, establishing distinct units suggested that the firm was always preparing to evolve into a significantly more influential entity.

This was demonstrated when Tether’s newly formed venture capital arm, the Evo  unit. In April 2024 invested $200 million into Neuralink competitor, Blackrock Neurotech. Tether Evo is seemingly focused on cutting-edge biotech, AI, and human-centric fields.

Doubts about the firm’s integrity and financial reserves were squashed earlier this year after the stablecoin giant posted its $4.5 billion Q1 2024 profits.

The attestation report  highlighted the strengths of Tether’s financial condition. It revealed that the firm held over $90 billion of its reserves in U.S. Treasury bonds. Furthermore, it also has $10 billion or so in cash, cash equivalents, Bitcoin (BTC), and gold.

Tether Transforms

The USDT coin faces stiff competition from the likes of Circle (USDC) who are increasingly gaining portions of Tether’s market share.

But that’s not a bad thing. It’s worth remembering that the crypto markets once feared having a single stablecoin dominating a majority of trading pairs.

Regulatory headwinds seem to suggest that the stablecoin ecosystem is set to undergo some changes in the near future. But, Tether’s new-found dedication to proactively investing in these key areas may mitigate these concerns and changes.

Tether is clearly looking to enhance its market position by opening up new revenue streams as it becomes a major player in the global financial ecosystem. This would also allow it to continue operating as a reliable and profitable stablecoin issuer.

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